<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Security Capital Pacific Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
7777 MARKET CENTER AVENUE
EL PASO, TEXAS 79912
----------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1997
To the shareholders:
The 1997 annual meeting of shareholders of Security Capital Pacific Trust
("PTR") will be held on Tuesday, June 10, 1997, at the Old El Paso Room,
Seventh Floor, Norwest Bank El Paso, El Paso, Texas, at 10:00 a.m. (El Paso
time) for the following purposes:
1. To elect a Board of Trustees to serve until the next annual meeting of
shareholders and until their successors are duly elected and qualify;
2. To approve the Security Capital Pacific Trust 1996 Share Option Plan
for Outside Trustees; and
3. To transact such other business as properly may come before the
meeting and any adjournment or postponement thereof.
Further information regarding the business to be transacted at the meeting
is given in the accompanying Proxy Statement.
Shareholders of record at the close of business on April 22, 1997 are
entitled to notice of, and to vote at, the meeting.
Please help PTR by promptly marking, dating, signing and returning the
enclosed proxy card in the envelope provided for your convenience. If you
attend the meeting and decide to vote in person, you may revoke your proxy.
By Order of the Board of Trustees,
Jeffrey A. Klopf
Secretary
April 28, 1997
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
7777 MARKET CENTER AVENUE
EL PASO, TEXAS 79912
----------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1997
----------------
GENERAL INFORMATION
The Board of Trustees (the "Board") of Security Capital Pacific Trust
("PTR") is soliciting the accompanying proxy for use at the 1997 annual
meeting of shareholders to be held on Tuesday, June 10, 1997 and at any and
all adjournments or postponements thereof. Any shareholder giving a proxy has
the right to revoke it at any time before it is voted by giving written notice
to the Secretary of PTR, by delivering to the Secretary of PTR a duly executed
proxy bearing a later date or by attending and voting in person at the
meeting. The designated proxy holders will vote common shares of beneficial
interest, par value $1.00 per share (the "Common Shares"), represented by a
proxy which is received and not revoked. If the shareholder specifies a choice
with respect to any matter to be acted upon and for which a ballot is provided
in the proxy, the Common Shares will be voted in accordance with his or her
specifications.
This Proxy Statement and the accompanying proxy card are first being mailed
to shareholders on or about April 28, 1997.
If you are a registered owner and plan to attend the meeting in person,
please detach and retain the admission ticket which is attached to your proxy
card. Beneficial owners who plan to attend the meeting in person may obtain
admission tickets in advance by sending written requests, along with proof of
ownership, such as a bank or brokerage firm account statement, to: Lucinda G.
Marker, Assistant Secretary, Security Capital Pacific Trust, 125 Lincoln
Avenue, Santa Fe, New Mexico 87501. Record owners and beneficial owners
(including the holders of valid proxies therefrom) who do not present
admission tickets at the meeting will be admitted upon verification of
ownership at the admissions counter at the annual meeting.
The cost of soliciting proxies will be borne by PTR. In addition to
solicitation by mail, and without additional compensation for such services,
proxies may be solicited personally, or by telephone or telegraph, by officers
or employees of Security Capital Pacific Incorporated, PTR's REIT manager (the
"REIT Manager" or "REIT Management"). See "Certain Relationships and
Transactions--REIT Management Agreement." PTR will also request banking
institutions, brokerage firms, custodians, trustees, nominees, fiduciaries and
other like parties to forward the solicitation material to the beneficial
owners of Common Shares held of record by such persons, and PTR will upon
request of such record holders reimburse forwarding charges and expenses.
SHARES OUTSTANDING AND VOTE REQUIRED
At the close of business on April 22, 1997, approximately 76,591,788 Common
Shares were outstanding. Each whole Common Share outstanding on April 22,
1997, the record date for determination of shareholders entitled to notice of,
and to vote at, the meeting, is entitled to one vote, and each fractional
Common Share is entitled to its fraction of one vote. There is no right to
cumulative voting. A majority of the outstanding Common Shares represented in
person or by proxy will constitute a quorum at the meeting.
<PAGE>
Assuming the existence of a quorum, the affirmative vote of a majority of
the Common Shares entitled to vote and represented in person or by proxy at
the meeting is required to elect each nominee for Trustee and to approve the
Security Capital Pacific Trust 1996 Share Option Plan for Outside Trustees
(the "1996 Outside Trustees Plan"). Representatives of PTR's transfer agent
will assist PTR in the tabulation of the votes. Abstentions and broker non-
votes are counted as Common Shares represented at the meeting for purposes of
determining a quorum. An abstention has the effect of a vote "withheld" with
respect to the election of Trustees and the effect of a vote "against" the
approval of the 1996 Outside Trustees Plan.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 15, 1997, the beneficial
ownership of Common Shares for each person known to PTR to have been the
beneficial owner of more than five percent of the outstanding Common Shares on
such date and all Trustees and executive officers of PTR as a group. Unless
otherwise indicated in the footnotes, all of such interests are owned directly
and the indicated person or entity has sole voting and dispositive power. The
following table assumes, for purposes of calculating the number and percent of
Common Shares beneficially owned by a person, that all Cumulative Convertible
Series A Preferred Shares of Beneficial Interest, par value $1.00 per share,
of PTR ("Series A Preferred Shares"), beneficially owned by such person (but
not any other Series A Preferred Shares) have been converted into Common
Shares. Fractional Common Shares have been rounded to the nearest whole Common
Share in the table below and elsewhere in this Proxy Statement. See "Election
of Trustees--Nominees" for information regarding the ownership of Common
Shares by each Trustee.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES PERCENT OF
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED SHARES
------------------------------------ ------------- ----------
<S> <C> <C>
Security Capital Group Incorporated.......... 27,389,833(1) 35.8%
125 Lincoln Avenue
Santa Fe, New Mexico 87501
The Capital Group Companies, Inc............. 4,954,580(2) 6.5%
333 South Hope Street
Los Angeles, California 90071
All Trustees and executive officers as a
group
(15 persons)................................ 239,614(3) *
</TABLE>
- --------
*Less than 1%
(1) These Common Shares are owned of record by SC Realty Incorporated, a
wholly owned subsidiary of Security Capital Group Incorporated ("Security
Capital Group"), and are pledged to secure Security Capital Group's $300
million revolving line of credit facility with a syndicate of banks. As of
April 15, 1997, there were no borrowings outstanding under the line of
credit. The line of credit is also secured by securities owned by Security
Capital Group of Security Capital Industrial Trust, a publicly traded REIT
("SCI"), Security Capital Atlantic Incorporated, a publicly traded REIT
("ATLANTIC"), Homestead Village Incorporated, a publicly traded real
estate operating company ("Homestead"), and Security Capital U.S. Realty,
a publicly traded entity based in Luxembourg which invests in real estate
operating companies in the United States. Security Capital Group estimates
that the aggregate market value of the pledged securities exceeded $2.8
billion as of April 15, 1997. Security Capital Group was in compliance
with all covenants under the line of credit at December 31, 1996.
(2) Information regarding beneficial ownership of Common Shares by The Capital
Group Companies, Inc. is included herein in reliance on an amendment to
Schedule 13G dated February 12, 1997 filed with the Securities and
Exchange Commission. Capital Research and Management Company, a subsidiary
of The Capital Group Companies, Inc., may be deemed to be the beneficial
owner of the Common Shares reported,
2
<PAGE>
which are owned by various investment companies. The Capital Group
Companies, Inc. has sole dispositive power with respect to all Common
Shares reported, and such Common Shares were acquired in the ordinary
course of business and were not acquired for the purpose, and do not have
the effect, of changing or influencing control of PTR.
(3) Includes 32,000 Common Shares issuable to PTR's independent Trustees upon
exercise of options granted under PTR's 1987 Share Option Plan for Outside
Trustees. See "Election of Trustees--Trustee Compensation."
ELECTION OF TRUSTEES
NOMINEES
The Common Shares represented by the accompanying proxy will be voted to
elect the seven nominees named below as Trustees, unless otherwise indicated
on the proxy. Should any of the nominees named below become unavailable for
election, which is not anticipated, the Common Shares represented by the
accompanying proxy will be voted for the election of another person
recommended by PTR. Trustees are elected to serve until the next annual
meeting of shareholders. Each Trustee has sole voting and dispositive power
with respect to the Common Shares beneficially owned by him. The Board
recommends that shareholders vote FOR the election of each nominee for
Trustee.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
OWNED
AT APRIL 15, 1997
-----------------
BUSINESS EXPERIENCE AND
DIRECTORSHIPS OF PUBLICLY HELD TRUSTEE COMMON
TRUSTEE AGE COMPANIES SINCE SHARES(1) PERCENT
------- --- ------------------------------ ------- --------- -------
<S> <C> <C> <C> <C> <C>
Calvin K. Kessler....... 65 President and principal shareholder, 1972 32,267 *
Kessler Industries, Inc., El Paso,
Texas (manufacturer of furniture and
aluminum castings) since 1960.
James H. Polk, III...... 54 President, Security Capital Markets 1976 50,000 *
Group Incorporated, Santa Fe, New
Mexico since March 1997 and Managing
Director from August 1992 to March
1997; affiliated with the REIT Man-
ager since March 1991; prior there-
to, President and Chief Executive
Officer of PTR for sixteen years;
registered with the National Associ-
ation of Securities Dealers, Inc.;
past President and Trustee of the
National Association of Real Estate
Investment Trusts, Inc. ("NAREIT").
John C. Schweitzer...... 52 Managing Partner, Continental Prop- 1976 34,602 *
erties Company, Austin, Texas (real
estate and investments) since 1976;
General Partner, G.P. Campbell Capi-
tal Ltd. (real estate and invest-
ments) since 1976; Trustee, Texas
Christian University; Director,
Homestead and Austin Smiles.
James A. Cardwell....... 65 Chairman and Chief Executive Offi- 1980 32,765 *
cer, Petro Stopping Centers, L.P.,
El Paso, Texas (operation of full-
service truck stopping centers)
since 1974; Director, El Paso Elec-
tric Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
OWNED
AT APRIL 15, 1997
-----------------
BUSINESS EXPERIENCE AND
DIRECTORSHIPS OF PUBLICLY HELD TRUSTEE COMMON
TRUSTEE AGE COMPANIES SINCE SHARES(1) PERCENT
------- --- ------------------------------ ------- --------- -------
<S> <C> <C> <C> <C> <C>
John T. Kelley, III..... 56 Advisory Trustee of SCI; from 1987 1988 16,835 *
to 1991, Chairman of the Board,
Kelley-Harris Company, Inc., El Pa-
so, Texas (real estate investment
company); from 1968 to 1987, Manag-
ing Director, LaSalle Partners Lim-
ited, Chicago, Illinois (corporate
real estate services); Director of
Security Capital Group and Tri State
Media and Trustee of Pacific Retail
Trust (ownership and development of
infill retail properties in the
southwestern United States).
C. Ronald Blankenship... 47 Chairman of PTR (will become non-ex- 1991 34,385 *
ecutive Chairman of PTR in June
1997); Chairman of the REIT Manager
and Managing Director of Security
Capital Group since March 1991; from
June 1988 to March 1991, Regional
Partner, Trammell Crow Residential,
Chicago, Illinois (multifamily real
estate development and property man-
agement); prior thereto, Executive
Vice President and Chief Financial
Officer, The Mischer Corporation,
Houston, Texas (multi-business hold-
ing company with investments primar-
ily in real estate).
William G. Myers........ 69 Chief Executive Officer of Ojai 1994 16,052 *
Ranch and Investment Company, Inc.,
Santa Barbara, California, which he
founded in 1963 (agri-business and
other investments); Director, Chal-
one Wine Group, Napa, California;
Trustee of SCI.
</TABLE>
- --------
*Less than 1%
(1) Includes for each of Messrs. Kessler and Cardwell beneficial ownership of
10,000 Common Shares, for Mr. Schweitzer beneficial ownership of 8,000
Common Shares and for Mr. Kelley beneficial ownership of 4,000 Common
Shares that are issuable upon exercise of options granted under PTR's 1987
Share Option Plan for Outside Trustees. See "--Trustee Compensation"
below.
Security Capital Group has the right to nominate up to three Trustees,
depending upon its level of ownership of Common Shares. See "Certain
Relationships and Transactions--Security Capital Group Investor Agreement."
Messrs. Blankenship, Kelley and Polk, due to their relationship with Security
Capital Group, are deemed to be the nominees of Security Capital Group. PTR's
Restated Declaration of Trust requires that a majority of the Trustees be
independent Trustees.
MEETINGS AND COMMITTEES
The Board held 44 meetings during 1996, including 40 telephonic meetings.
The Audit Committee of the Board, composed of Messrs. Cardwell and Kessler, is
responsible for recommending to the Board the appointment of independent
auditors, reviewing all recommendations of the auditors with respect to
accounting methods and internal controls of PTR, reviewing and approving non-
audit services and reviewing the scope of
4
<PAGE>
the audits conducted by the auditors. The Audit Committee held two meetings
during 1996. Also, in January 1997, the Board established a Compensation
Committee consisting of Messrs. Blankenship, Kelley and Myers, which reviews
and approves PTR's compensation arrangements and plans. PTR has no standing
nominating committee. During 1996, each Trustee attended at least 75 percent
of the total number of meetings of the Board and the committees on which he
served (except that Messrs. Cardwell and Kelley attended approximately 60% and
72%, respectively, of such meetings).
TRUSTEE COMPENSATION
Trustees who are not employees of the REIT Manager or any of its affiliates
receive an annual retainer of $18,000 and meeting fees of $1,000 for each
Board meeting attended (other than telephonic meetings), and the chairpersons
of each committee receive an additional retainer of $1,000. Both the retainers
and meeting fees are paid quarterly. Employees of the REIT Manager or any of
its affiliates who are Trustees are not paid any Trustee fees. Messrs.
Blankenship and Polk are not separately compensated for serving as Trustees.
Trustees are reimbursed for any out-of-town travel expenses incurred in
connection with attendance at Board meetings.
In addition, if the 1996 Outside Trustees Plan is approved by shareholders,
each Trustee who is not an employee or officer of PTR or Security Capital
Group or any of its affiliates (the "Outside Trustees") will be entitled to
receive, on the date of each annual meeting of shareholders held prior to
January 1, 2007, an option (an "Option") to purchase 2,000 Common Shares at a
price per share equal to the closing price of a Common Share on the New York
Stock Exchange (the "NYSE") on such date. The Outside Trustees of PTR received
similar options under PTR's 1987 Share Option Plan for Outside Trustees, which
expired on December 31, 1996. See "Adoption of the 1996 Outside Trustees
Plan."
PTR OFFICERS
All of the officers of PTR are officers and employees of the REIT Manager
and are compensated solely by the REIT Manager for their services as employees
of the REIT Manager, including the services which such persons perform
pursuant to the REIT Management Agreement between the REIT Manager and PTR
described below. All executive functions of PTR are performed by the REIT
Manager and PTR currently has no employees. See "Certain Relationships and
Transactions--REIT Management Agreement." For a description of an agreement
that PTR has entered into with Security Capital Group to merge the REIT
Manager and SCG Realty Services Incorporated ("SCG Realty Services"), its
property management affiliate, into a newly formed subsidiary of PTR in
exchange for Common Shares, see "Certain Relationships and Transactions--The
Merger Transaction."
ADOPTION OF THE 1996 OUTSIDE TRUSTEES PLAN
A proposal will be presented at the annual meeting to approve the 1996
Outside Trustees Plan, which was adopted by the Board on December 10, 1996,
subject to shareholder approval. The Common Shares represented by the
accompanying proxy will be voted to adopt the 1996 Outside Trustees Plan,
unless otherwise indicated on the proxy. The 1996 Outside Trustees Plan is
substantially similar to PTR's 1987 Share Option Plan for Outside Trustees,
which expired on December 31, 1996. A summary of the material provisions of
the 1996 Outside Trustees Plan is set forth below and is qualified in its
entirety by reference to the 1996 Outside Trustees Plan as set forth in
Appendix A hereto. The Board recommends that shareholders vote FOR the
adoption of the 1996 Outside Trustees Plan.
GENERAL
The purpose of the 1996 Outside Trustees Plan is to enable the Outside
Trustees of PTR to increase their ownership of PTR and thereby increase the
alignment of their interests with those of PTR's other shareholders.
To achieve the foregoing objective, the 1996 Outside Trustees Plan provides
for grants of Options to purchase Common Shares. The Secretary of PTR (the
"Administrator") administers the 1996 Outside Trustees
5
<PAGE>
Plan with a view to PTR's best interests and the 1996 Outside Trustees Plan's
objectives. The Administrator has authority to adopt administrative
guidelines, rules and regulations relating to the 1996 Outside Trustees Plan
and to make all determinations necessary or advisable for the implementation
and administration of the 1996 Outside Trustees Plan.
The number of Common Shares reserved for issuance upon exercise of Options
granted under the 1996 Outside Trustees Plan is 100,000. Common Shares that
are forfeited will again become available for awards under the 1996 Outside
Trustees Plan.
In the event of changes in the outstanding Common Shares by reason of any
increase or decrease in the number of issued Common Shares resulting from a
subdivision or consolidation of Common Shares or the payment of a dividend in
Common Shares, or any other increase or decrease in the number of Common
Shares, or merger or consolidation, or recapitalization, reorganization,
spinoff, exchange or other distribution or other similar event, the
Administrator shall make appropriate adjustments to the aggregate number of
Common Shares available under the 1996 Outside Trustees Plan and the type and
number of Shares subject to Options under the 1996 Outside Trustees Plan and
the terms of such Options (including the exercise price thereof).
On the date of each annual meeting of shareholders of PTR for the years 1997
through and including 2006, each Outside Trustee serving on such date (after
the election of Trustees in the meeting) will be granted an Option to purchase
2,000 Common Shares at an exercise price equal to the closing price of the
Common Shares on the NYSE on such date. In 1997, Options for 2,000 Common
Shares will be awarded under the 1996 Outside Trustees Plan to each of Messrs.
Cardwell, Kelley, Kessler, Myers and Schweitzer.
Each Option will be immediately exercisable, but must be exercised before
the earliest of the following events to occur: the date that is three months
after the date that the Option holder's position as a Trustee terminates, the
date that is twelve months after the date the Trustee becomes disabled or dies
or the date that is five years after the date the Option is granted.
If fifty percent or more of the outstanding Common Shares are acquired in a
cash tender offer or exchange offer, each Option holder shall have the right
to exercise his or her Option in full or surrender his or her outstanding
Option in exchange for a cash payment from PTR in an amount equal to the
excess of the offer price or value over the Option price. If PTR dissolves,
each Option holder shall have the right to exercise his or her Option in full
before the date of the dissolution.
AMENDMENT AND TERMINATION
The 1996 Outside Trustees Plan may be amended or terminated at any time by
the Board. The provisions relating to the amount, price and timing of grants
under the 1996 Outside Trustees Plan may not be amended more than once every
six months, other than to comply with changes in the Internal Revenue Code of
1986, as amended, or the rules thereunder, unless such amendment would not
affect the exemption provided by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief description of the federal income tax treatment
that will generally apply to grants under the 1996 Outside Trustees Plan based
on current law.
The grant of an Option under the 1996 Outside Trustees Plan will not itself
be a taxable event and the Option holder will not be subject to any income tax
consequences with respect to the Option unless and until the Option is
exercised. Upon the exercise of the Option, the Option holder will generally
recognize ordinary compensation income equal to the "spread" between the
exercise price and the fair market value of the Common Shares on the date of
exercise and PTR will be entitled to a corresponding tax deduction at the time
the Option holder realizes ordinary income. The Option holder's tax basis in
the Common Shares will equal the sum of the exercise price paid and the amount
of ordinary compensation income recognized by the Option holder upon the
exercise of the Option. The Option holder's holding period for the Common
Shares will begin on the day on which the Common Shares are acquired pursuant
to the exercise of the Option. Upon a subsequent sale of the Common Shares,
the Option holder will generally recognize a capital gain or loss equal to the
difference between the amount realized in the sale and such Option holder's
tax basis in the Common Shares, assuming the Common Shares are a capital asset
in the hands of the Option holder. Such gain or loss will be long-term capital
gain or loss if the Common Shares have been held for more than one year.
6
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on Common Shares against the
cumulative total return of the Standard & Poor's Composite-500 Stock Index and
the NAREIT Equity REIT Index for the five-year period commencing January 1,
1992 and ended December 31, 1996. The Common Share price performance shown on
the graph is not necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
PTR COMMON SHARES, S&P COMPOSITE-500 STOCK INDEX
& NAREIT EQUITY REIT INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PTR..................................... $148.38 $221.74 $210.67 $246.32 $351.48
S&P 500................................. 107.61 118.39 119.99 164.92 202.69
NAREIT.................................. 114.59 137.16 141.46 163.06 220.56
</TABLE>
- --------
(1) Assumes that the value of the investment in Common Shares and each index
was $100.00 on January 1, 1992 and that all dividends were reinvested. For
purposes of calculating total return on the Common Shares, the Homestead
Distribution described below in "Certain Relationships and Transactions--
Homestead Transaction" was valued based on the closing prices of the
securities distributed on the American Stock Exchange (the "ASE") on
November 12, 1996, the day of the distribution.
7
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
REIT MANAGEMENT AGREEMENT
Effective March 1, 1991, PTR entered into a REIT management agreement (the
"REIT Management Agreement") with the REIT Manager pursuant to which the REIT
Manager assumed day-to-day management of PTR. All officers of PTR are
employees of the REIT Manager and PTR currently has no employees. The REIT
Manager provides both strategic and day-to-day management of PTR, including
research, investment analysis, acquisition, development, dispositions,
property management, capital markets, legal, accounting and other
administrative services. The REIT Manager is a wholly owned subsidiary of
Security Capital Group, which owned approximately 36.0% of the Common Shares
as of March 31, 1997. See "Principal Shareholders."
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement in
excess of $4,837,000, payable monthly. In the REIT Management Agreement, cash
flow is calculated by reference to PTR's cash flow from operations plus (i)
fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the
request of the independent Trustees of PTR and (iii) 33% of any interest paid
by PTR on convertible subordinated debentures (of which there has been none
since the inception of the REIT Management Agreement); and after deducting (i)
regularly scheduled principal payments (excluding prepayments or balloon
payments) for debt with commercially reasonable amortization schedules, (ii)
actual or assumed principal and interest payments on long-term debt, (iii)
interest income received in connection with convertible mortgage notes of
Homestead and (iv) distributions actually paid with respect to any
nonconvertible preferred shares of beneficial interest of PTR. The REIT
Management Agreement provides that long-term unsecured debt is treated as if
it had regularly scheduled principal and interest payments similar to a 20-
year, level monthly payment, fully amortizing mortgage, and the assumed
principal and interest payments are deducted from cash flow in determining the
fee. Cash flow does not include dividend and interest income from PTR
Development Services Incorporated, realized gains or losses from dispositions
of investments or income from cash equivalent investments. The REIT Manager
also receives a fee of 0.25% per year on the average daily balance of cash
equivalent investments.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR relating to PTR's operations, consisting
primarily of external professional fees, offering costs and travel expenses.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees (who receive performance benchmark
information verified by an independent third party) that the REIT Manager's
performance has been satisfactory and that the compensation payable to the
REIT Manager is fair. Each of PTR and the REIT Manager may terminate the REIT
Management Agreement on 60 days' notice. Because of the year-to-year nature of
the agreement, its maximum effect on PTR's results of operations cannot be
predicted, other than that REIT Management fees will generally increase or
decrease in proportion to cash flow increases or decreases. For 1996, the REIT
Manager earned REIT Management fees totalling $22,191,000. See "--The Merger
Transaction" for a description of an agreement PTR has entered into with
Security Capital Group to merge the REIT Manager and SCG Realty Services into
a newly formed subsidiary of PTR in exchange for Common Shares.
SECURITY CAPITAL GROUP INVESTOR AGREEMENT
Pursuant to various agreements, as amended (the "Investor Agreement"),
between PTR and Security Capital Group, Security Capital Group is entitled to
designate three persons to be nominated for election to the Board. Messrs.
Blankenship, Kelley and Polk, due to their relationship with Security Capital
Group, are deemed to be the nominees of Security Capital Group. So long as
Security Capital Group beneficially owns at least 10% of the Common Shares,
PTR is prohibited from increasing the number of members of the Board to more
than eight. Additionally, the Investor Agreement, among other things, requires
PTR to obtain Security Capital Group's
8
<PAGE>
approval of (i) the annual operating budget and substantial deviations
therefrom, (ii) contracts for investment management, property management or
leasing services or that contemplate annual payments in excess of $100,000 and
(iii) acquisitions or dispositions in a single transaction or a group of
related transactions where the purchase or sale price exceeds $5 million. The
Investor Agreement also provides certain registration rights to Security
Capital Group in respect of Common Shares beneficially owned by Security
Capital Group.
Security Capital Group is permitted to acquire beneficial ownership of up to
49% of the outstanding Common Shares (assuming the conversion or exchange of
all convertible or exchangeable PTR securities) without triggering any of
PTR's anti-takeover defenses (such as the provision in PTR's Restated
Declaration of Trust permitting PTR to redeem Common Shares owned in excess of
9.8% of the outstanding Common Shares). PTR also has provided Security Capital
Group a limited exemption from the application of two anti-takeover statutes
promulgated in Maryland, the state in which PTR is organized. Security Capital
Group has agreed not to acquire for its own account or through its affiliates,
as defined in the Investor Agreement, more than 49% of the outstanding Common
Shares (assuming the conversion or exchange of all convertible or exchangeable
PTR securities) except, if at all, pursuant to an all cash tender offer for
all Common Shares which is held open for at least 90 days. PTR would not be
restricted in opposing any such tender offer. See "--The Merger Transaction--
Relationship with Security Capital Group After the Merger" for a description
of the revised investor agreement which would replace the current Investor
Agreement if the Merger described below is consummated.
PROPERTY MANAGEMENT
PTR believes that its communities must be actively managed in order to
maximize cash flow and enhance long-term economic performance. Therefore, PTR
has retained SCG Realty Services, its affiliated multifamily property
management and customer service firm wholly owned by Security Capital Group,
to manage most of PTR's communities. As of April 15, 1997, approximately 95.0%
of PTR's operating multifamily communities were managed by SCG Realty
Services, based on total expected investment, with the balance of the
communities in various stages of transition to SCG Realty Services'
management. Rates for services performed by SCG Realty Services are subject to
annual approval by PTR's independent Trustees (who receive an annual review of
fees paid for similar services from an independent third party). The Trustees
believe such services are performed at market rates. During 1996, PTR paid
aggregate fees of $9.7 million to SCG Realty Services and aggregate fees of
$1.9 million to Homestead Realty Services Incorporated for property management
services relating to PTR's Homestead Village(R) properties. See "--The Merger
Transaction" for a description of an agreement that PTR has entered into with
Security Capital Group to merge the REIT Manager and SCG Realty Services into
a newly formed subsidiary of PTR in exchange for Common Shares.
HOMESTEAD TRANSACTION
In March 1996, the Board began considering ways for PTR to maximize
shareholder value with respect to its Homestead Village(R) properties. In May
1996, PTR, ATLANTIC, Security Capital Group and Homestead entered into a
merger agreement, pursuant to which each of PTR, ATLANTIC and Security Capital
Group agreed to contribute, through a series of merger transactions, all of
their respective assets relating to Homestead Village(R) properties to
Homestead, and PTR and ATLANTIC agreed to enter into funding commitment
agreements (see "--Funding Commitment Agreement"). PTR's and ATLANTIC's
respective shareholders approved the Homestead transaction on September 12,
1996 and September 13, 1996, respectively, and the closing of the Homestead
transaction occurred on October 17, 1996, which resulted in PTR (a) owning
9,485,727 shares of Homestead common stock, (b) owning 6,363,789 warrants to
purchase one share of Homestead common stock at $10.00 per share and (c)
owning approximately $84.5 million of convertible mortgage notes with an
obligation to fund up to an additional approximately $136.8 million of
convertible mortgage notes as described below (see "--Funding Commitment
Agreement"). PTR distributed the Homestead common stock and warrants which it
received to its shareholders pro rata on November 12, 1996 (the "Homestead
Distribution"). Each holder of record of a Common Share on October 29, 1996
received 0.125694 shares of Homestead common stock and warrants to purchase
0.084326 shares of Homestead common stock. The Homestead common stock and
warrants trade on the ASE under the symbols "HSD" and "HSD.W," respectively.
9
<PAGE>
FUNDING COMMITMENT AGREEMENT
Pursuant to a funding commitment agreement entered into at the closing of
the Homestead transaction, PTR agreed to make mortgage loans to Homestead of
up to $198.8 million, including $75.9 million which was funded prior to the
closing of the transaction, which amount was anticipated to be sufficient to
complete the development of the Homestead Village(R) properties contributed by
PTR. PTR received 6,363,789 warrants, each to purchase one share of Homestead
common stock, in exchange for its entering into the funding commitment
agreement, which PTR subsequently distributed pro rata to its shareholders in
the Homestead Distribution. Each Homestead warrant is exercisable at $10.00
per share and expires October 27, 1997. The exercise price was determined
based on the overall structure of the Homestead transaction and, in
particular, considering Homestead's future capital needs and a desire to
provide liquidity to PTR's shareholders with respect to their warrants. PTR
will receive convertible mortgage notes in respect of fundings under the
funding commitment agreement in stated amounts of up to $221.3 million,
including the $84.5 million of notes which were outstanding at the closing of
the Homestead transaction. The effect of these provisions of the funding
commitment agreement is that PTR will fund approximately $900,000 for each
$1,000,000 principal amount of convertible mortgage loans. The convertible
mortgage loans are recorded for financial reporting purposes at a discount of
approximately $22.5 million which are being amortized and recorded as an
adjustment to interest income over the ten-year term of the mortgage loans
using the effective interest method. The relative ownership percentages of
PTR, ATLANTIC and Security Capital Group in Homestead were determined based
upon the relative value of the contributed assets assuming that all of the
properties to be contributed had been developed and were fully operational.
PTR agreed to fund convertible mortgages to provide for the development of the
Homestead Village(R) properties and to achieve its ownership allocations. The
funded amount of PTR under the convertible mortgages was in an amount that was
anticipated, pursuant to development budgets, to be sufficient to complete the
development of the Homestead Village(R) properties contributed by PTR. The
difference between the funded amount and the stated amount of the convertible
mortgage loans arose because the rate of return on the existing Homestead
Village(R) properties contributed by PTR was projected to exceed the rates of
return on the Homestead Village(R) properties contributed by PTR and ATLANTIC
to Homestead which were under construction or in pre-development planning.
This expected difference in the rates of return arose because, as of July 1,
1996, PTR was expected to have 28 Homestead Village(R) properties in operation
and generating income, while ATLANTIC was expected to have none. Additionally,
the average property development costs for the existing PTR Homestead
Village(R) properties, on balance, were expected to be less than those for the
PTR and ATLANTIC Homestead Village(R) properties projected to be built in the
future because a large portion of the existing PTR Homestead Village(R)
properties were in planning or under development during 1992 and 1993 when
land prices and construction costs were less than they were when the
transaction was negotiated and were anticipated to be over the next 18 months.
Because of the foregoing factors, and as a result of Homestead's desire to
issue a single class of convertible mortgage notes bearing a 9% per annum
interest rate, the stated amounts of the convertible mortgage notes were
adjusted to provide an effective yield (after giving effect to the original
issue discount and premium for PTR and ATLANTIC, respectively, and the
issuance of the Homestead warrants and the convertibility of the mortgage
notes) to each of PTR (approximately 12.4% on a fully funded basis) and
ATLANTIC (approximately 8.5% on a fully funded basis) that was reflective of
the relative rates of return anticipated to be realized on all of the
properties contributed by PTR and ATLANTIC, respectively. These rates were
estimated at the time of the closing of the Homestead transaction and the
actual effective yields will depend upon the timing of fundings under the
funding commitment agreements.
The obligation of PTR is limited to a specific dollar amount for each
property identified in the funding commitment agreement. Upon any
determination by Homestead to commence development of a property identified in
the funding commitment agreement, Homestead is required to notify PTR and PTR
is required to fund up to the full amount of its obligation with respect to
such property. Homestead is required to endeavor in good faith to complete the
development of such property consistent with the development plans for such
property. Each mortgage note issued by Homestead pursuant to the funding
commitment agreement is convertible into shares of Homestead common stock on
the basis of one share of Homestead common stock for every $11.50 of principal
outstanding on the mortgage loan. The obligation of Homestead to call for
funding of, and the obligation of PTR to provide funding for, the mortgage
loans expire on March 31, 1998, except with respect to properties for which
Homestead has given notice that it intends to develop. Interest on the
mortgage notes
10
<PAGE>
accrues at the rate of 9% per annum on the unpaid principal balance, payable
every six months. The mortgage notes are scheduled to mature on October 31,
2006, and are not callable until October 27, 2001. Homestead has pledged the
assets that were contributed by PTR as collateral for the mortgage loans being
made by PTR. At December 31, 1996, PTR had advanced $101.2 million under the
funding commitment agreement and $112.6 million of mortgage notes (face amount)
were outstanding on such date.
PROTECTION OF BUSINESS AGREEMENT
PTR entered into a protection of business agreement with Homestead at the
closing of the Homestead transaction which prohibits PTR and its affiliates
from engaging, directly or indirectly, in the extended-stay lodging business
except through Homestead and its subsidiaries. The agreement also prohibits
Homestead from, directly or indirectly, engaging in the ownership, operation,
development, management or leasing of multifamily communities. The agreement
does not prohibit PTR from: (i) owning securities of Homestead; (ii) owning up
to 5% of the outstanding securities of another person engaged in owning,
operating, developing, managing or leasing extended-stay lodging properties, so
long as it does not actively participate in the business of such person; (iii)
owning the outstanding securities of another person, a majority-owned
subsidiary, division, group, franchise or segment of which is engaged in
owning, operating, developing, managing or leasing extended-stay lodging
properties, so long as not more than 5% of such person's consolidated revenues
are derived from such properties; and (iv) owning securities of another person
primarily engaged in a business other than owning, operating, developing,
managing or leasing extended-stay lodging properties, including a person
primarily engaged in business as an owner, operator or developer of hotel
properties, whether or not such person owns, operates, develops, manages or
leases extended-stay lodging properties. The agreement does not prohibit
Homestead from: (i) owning securities of PTR, ATLANTIC or Security Capital
Group; (ii) owning up to 5% of the outstanding securities of another person
engaged in owning, operating, developing, managing or leasing garden-style
multifamily communities; and (iii) owning the outstanding securities of another
person, a majority-owned subsidiary, division, group, franchise or segment of
which is engaged in owning, operating, developing, managing or leasing garden-
style multifamily communities, so long as not more than 5% of such person's
consolidated revenues are derived from such communities. The agreement will
terminate in the event of an acquisition, directly or indirectly (other than by
purchase from PTR, ATLANTIC or Security Capital Group or any of their
respective affiliates), by any person (or group of associated persons acting in
concert), other than PTR, ATLANTIC or Security Capital Group or their
respective affiliates, of 25% or more of the outstanding voting stock of
Homestead, without the prior written consent of Homestead's board of directors.
Subject to earlier termination pursuant to the preceding sentence, the
protection of business agreement will terminate on October 17, 2006.
HOMESTEAD INVESTOR AGREEMENT
PTR entered into an investor and registration rights agreement with Homestead
at the closing of the Homestead transaction pursuant to which PTR is entitled
to designate one person for nomination to the Homestead board of directors, and
Homestead will use its best efforts to cause the election of such nominee,
until March 31, 1998 and for so long thereafter as PTR has the right to convert
in excess of $20 million in principal amount of loans made pursuant to its
funding commitment agreement. Such nominee may, but need not, include the same
person(s) nominated by Security Capital Group pursuant to Security Capital
Group's investor agreement with Homestead. In addition, Homestead has granted
to PTR registration rights with respect to the distribution of all of the
shares of Homestead common stock issuable upon conversion of the convertible
mortgage notes. Prior to October 22, 1997, PTR may request one registration of
those shares of Homestead common stock which are issued upon conversion of any
or all of the convertible mortgage notes during such one-year period and which
it intends to distribute to its shareholders. After such one-year anniversary,
PTR may request three additional registrations pursuant to Rule 415 promulgated
under the Securities Act of 1933, as amended, of all shares of Homestead common
stock issued or issuable upon conversion of the convertible mortgage notes.
Such registration, except for the fees and disbursements of counsel to PTR,
shall be at the expense of Homestead.
THE MERGER TRANSACTION
The Transaction
In January 1997, Security Capital Group made a proposal to the Board that
Security Capital Group exchange the REIT Manager and SCG Realty Services for
Common Shares, with the result that PTR would become an
11
<PAGE>
internally managed REIT. On March 24, 1997, Security Capital Group and PTR
entered into a Merger and Issuance Agreement, as amended (the "Merger
Agreement"), which is subject to customary closing conditions, including the
approval of PTR's shareholders, pursuant to which Security Capital Group will
cause the REIT Manager and SCG Realty Services to be merged into a newly
formed subsidiary of PTR (the "Merger"). The employees of the REIT Manager and
SCG Realty Services will become employees of PTR as a result of the Merger. In
exchange for the transfer of those businesses, PTR will issue to Security
Capital Group Common Shares valued at approximately $75.8 million. The number
of Common Shares issuable to Security Capital Group will depend on the average
market price of the Common Shares prior to the record date for determining
PTR's shareholders entitled to vote at the meeting in connection with the
Merger, subject to a maximum and minimum number of Common Shares.
In order to allow PTR's shareholders to maintain their relative ownership in
PTR, concurrently with the proxy solicitation seeking approval of the Merger,
PTR will conduct a rights offering entitling its shareholders (other than
Security Capital Group) to purchase up to approximately $135 million of
additional Common Shares (subject to adjustment for further issuances of
Common Shares prior to the record date therefor). The exercise price for
Common Shares in the rights offering is expected to be the same price at which
Common Shares will be issued to Security Capital Group under the Merger
Agreement if the price of the Common Shares remains within a specified range.
In addition, as part of the Merger transaction, and in order to permit holders
of Common Shares to benefit from the Merger transaction on the same terms as
equity holders in Security Capital Group, Security Capital Group will issue
warrants to purchase shares of Security Capital Group's Class B common stock
pro rata to PTR's shareholders (the "Warrant Issuance"), other than Security
Capital Group, after the closing of the Merger and the rights offering. The
Warrant Issuance will result in taxable ordinary income to PTR's shareholders
who receive the warrants, whether or not the shareholders sell the warrants
received in the Warrant Issuance.
THIS PROXY STATEMENT DOES NOT RELATE TO THE MERGER. YOU WILL BE RECEIVING A
SEPARATE PROXY STATEMENT WITH RESPECT TO THE MERGER. A SPECIAL SHAREHOLDERS'
MEETING TO VOTE ON THE MERGER IS EXPECTED TO BE HELD IN THE THIRD QUARTER OF
1997.
Relationship with Security Capital Group After the Merger
Under the terms of the Merger Agreement, and assuming the Merger Agreement
is approved by PTR's shareholders, PTR will enter into a revised investor
agreement with Security Capital Group upon consummation of the Merger which
will provide that so long as Security Capital Group owns 25% or more of the
Common Shares, Security Capital Group will continue to have rights to direct
major policies of PTR. See "--Security Capital Group Investor Agreement" for a
description of the current Investor Agreement. Security Capital Group will
have the right, so long as it owns between 10% and 25% of the Common Shares,
to nominate one person to the Board. So long as Security Capital Group owns
25% or more of the Common Shares, Security Capital Group will be entitled to
nominate a proportionate number of persons to the Board subject to a maximum
of three nominees if the size of the Board does not increase above the current
size. Under the revised investor agreement, PTR will be required to consult
with Security Capital Group's nominees to the Board prior to taking any action
with respect to the following: (i) finalization of the annual budget and
substantial deviations therefrom; (ii) the acquisition or sale of assets in a
single transaction where the price exceeds $25 million; (iii) any contract for
investment, property management or leasing services; and (iv) any service
contract providing for payments in excess of $1.0 million. PTR will have no
obligation to follow the advice of Security Capital Group with respect to the
foregoing matters.
Under the revised investor agreement, Security Capital Group will also have
the right of prior approval with respect to the following matters: (i) the
issuance of equity securities or securities convertible into equity securities
(other than issuances in connection with option, dividend reinvestment and
similar plans) for less than the fair market value of such securities; (ii)
the issuance of any preferred shares which would result in the Fixed Charge
Coverage Ratio (as defined) being less than 1.4 to 1.0; (iii) adopting any
employee benefit plans under which Common Shares may be issued; (iv) the
compensation of senior officers of PTR; and (v) incurring additional
12
<PAGE>
indebtedness which would result in the Interest Expense Coverage Ratio (as
defined) being less than 2.0 to 1.0. Finally, under the revised investor
agreement, Security Capital Group has the right to call a special meeting of
shareholders to consider a Security Capital Group proposed slate of nominee
Trustees in the event that any of its approval rights are held to be
unenforceable by a court.
Security Capital Group will be permitted to make job opportunities with its
affiliates, including ATLANTIC and SCI, available to the officers and
employees of PTR; provided that Security Capital Group gives the Board two
weeks' notice prior to making an opportunity available to a senior officer of
PTR.
Under the terms of the Merger Agreement, and assuming the Merger Agreement
is approved by PTR's shareholders, PTR will also enter into an administrative
services agreement with a subsidiary of Security Capital Group. Under this
agreement, Security Capital Group will provide PTR with certain administrative
and other services requested by PTR. PTR will not be required to purchase any
services. The fees payable to Security Capital Group will be equal to Security
Capital Group's cost of providing such services plus 20%. For the initial term
of the agreement (through December 31, 1998), the fees payable to Security
Capital Group will not exceed approximately $7.7 million of which
approximately $2.2 million will apply to the period between the closing of the
Merger and December 31, 1997 and the remainder will apply to 1998, but may be
less than such amount.
In addition, pursuant to a protection of business agreement to be entered
into with Security Capital Group in connection with the Merger Agreement,
Security Capital Group will agree that, for a three-year term, neither it nor
any affiliate will provide substantially the same services as those being
provided by the REIT Manager and SCG Realty Services to any person within the
United States owning or operating real property that is or is planned to be
used primarily for multifamily communities.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires PTR's Trustees, officers and
beneficial owners of more than ten percent of the outstanding Common Shares to
file reports of ownership and changes in ownership of the Common Shares with
the Securities and Exchange Commission and to send copies of such reports to
PTR. Based solely upon a review of such reports and amendments thereto
furnished to PTR and upon written representations of certain of such persons
that they were not required to file certain of such reports, PTR believes that
no such person failed to file any such report on a timely basis during 1996,
except that Jay S. Jacobson and R. Scot Sellers, executive officers of PTR,
each filed one late report with respect to one transaction during 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected KPMG Peat Marwick LLP, certified public accountants,
who have served as auditors for PTR since 1980, to serve again as the auditors
of PTR's books and records for the coming year. A representative of KPMG Peat
Marwick LLP is expected to be present at the annual meeting, and will be given
an opportunity to make a statement if such representative desires to do so and
will be available to respond to appropriate questions.
ANNUAL REPORT
PTR's 1996 Annual Report, which includes financial statements, has
previously been mailed to shareholders or is being mailed to shareholders
together with this Proxy Statement. The Annual Report does not constitute a
part of the proxy solicitation material.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder of PTR intended to be presented at the 1998
annual meeting of shareholders must be received by PTR at its principal
executive offices not later than December 28, 1997, for inclusion in PTR's
proxy statement and form of proxy relating to that meeting.
13
<PAGE>
OTHER MATTERS
PTR is not aware of any business or matter other than those indicated above
which may properly be presented at the meeting. If, however, any other matter
properly comes before the meeting, the proxy holders will, in their
discretion, vote thereon in accordance with their best judgment.
By Order of the Board of Trustees,
Jeffrey A. Klopf
Secretary
April 28, 1997
14
<PAGE>
APPENDIX A
SECURITY CAPITAL PACIFIC TRUST
1996 SHARE OPTION PLAN FOR OUTSIDE TRUSTEES
SECTION 1
PURPOSE
The Security Capital Pacific Trust 1996 Share Option Plan for Outside
Trustees (the "Plan") has been established by Security Capital Pacific Trust
(the "Company") to promote the interests of the Company and its shareholders
by enhancing the Company's ability to attract and retain the services of
experienced and knowledgeable trustees and by encouraging such trustees to
acquire a proprietary interest in the Company.
SECTION 2
OPTION GRANTS
2.1. Election. Each Eligible Trustee shall be entitled to the grant of an
"Option", subject to the following:
(a) Each member of the Board of Trustees of the Company (the "Board") who
is not an employee of the Company or any Related Company shall be an
"Eligible Trustee". A "Participant" is an Eligible Trustee who has received
an Option under the Plan.
(b) As of the first business day after each annual meeting of the
Company's shareholders after December 10, 1996 (the "Effective Date"), each
Trustee who is then an Eligible Trustee shall be granted an Option to
purchase 2,000 Common Shares of Beneficial Interest, par value $1.00 per
share (the "Stock").
(c) If an individual becomes an Eligible Trustee on a date other than an
annual meeting, he shall be granted an Option to purchase a number of
shares of Stock as of the date on which he first becomes an Eligible
Trustee. The number of shares subject to the Option shall be the number
which would have been subject to the Option if he had become an Eligible
Trustee at the immediate preceding annual meeting, except that such number
of shares shall be subject to a pro-rata reduction to reflect the portion
of the year prior to the date on which he becomes an Eligible Trustee. In
no event shall an Option be granted with respect to a fractional share, and
the amount of any pro-rata reduction shall be rounded to the nearest whole
share.
(d) The term "Related Company" means any company during any period in
which it is a "parent company" (as that term is defined in section 424(e)
of the Internal Revenue Code of 1986, as amended (the "Code")) or a
"subsidiary corporation" (as that term is defined in Code section 424(f))
with respect to the Company.
2.2. Option Terms. Each Option granted pursuant to this Section shall be
subject to the following:
(a) Each Option shall provide for a per-share exercise price equal to the
Fair Market Value of a share of Stock on the date as of which the Option is
granted (but in no event less than the par value of a share of Stock). The
"Fair Market Value" of a share of Stock of the Company as of any date shall
be determined in accordance with the following rules:
(i) If the Stock is at the time listed or admitted to trading on any
stock exchange, then the Fair Market Value shall be the average of the
highest and lowest sales price per share of the Stock on such date on
the principal exchange on which the Stock is then listed or admitted to
trading or, if no such sale is reported on that date, on the last
preceding date on which a sale was so reported.
A-1
<PAGE>
(ii) If the Stock is not at the time listed or admitted to trading on
a stock exchange, the Fair Market Value shall be the average of the
lowest reported bid price and highest reported asked price of the Stock
on the date in question in the over-the-counter market, as such prices
are reported in a publication of general circulation selected by the
Administrator and regularly reporting the market price of Stock in such
market.
(iii) If the Stock is not listed or admitted to trading on any stock
exchange or traded in the over-the-counter market, the Fair Market
Value shall be as determined by the Administrator in good faith.
(b) The full purchase price of each share of Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise and, as
soon as practicable thereafter, a certificate representing the shares so
purchased shall be delivered to the person entitled thereto.
(c) The Option purchase price shall be payable in cash or in shares of
Stock held at least six months (valued at Fair Market Value as of the day
of exercise) or in any combination thereof. If a cashless exercise
procedure is established by the Company, a Trustee may elect to pay the
purchase price upon the exercise of an Option granted pursuant to this
Section through such cashless exercise procedure.
(d) Each Option shall be immediately exercisable.
(e) An Option shall expire on the earlier of: (i) the five-year
anniversary of the date it is granted; (ii) the three-month anniversary of
the Trustee's Date of Termination for any reason other than death or
Disability, or (iii) the one-year anniversary of the Trustee's Date of
Termination by reason of death or Disability.
(f) Each Option granted under this Section shall be evidenced by an
Agreement duly executed on behalf of the Company and by the Trustee to whom
such Option is granted and dated as of the applicable date of grant. Each
Agreement shall comply with and be subject to the terms of the Plan.
(g) The Options are not intended to be "incentive stock options" as that
term is described in section 422 of the Code.
(h) A Participant's "Date of Termination" shall be the day following the
last day on which he serves as a Trustee.
(i) A Trustee shall be considered to have a "Disability" during the
period in which he is unable, by reason of a medically determinable
physical or mental impairment, to engage in any substantial gainful
activity, which condition, in the opinion of a physician selected by the
Administrator, is expected to have a duration of not less than 120 days.
SECTION 3
OPERATION AND ADMINISTRATION
3.1. Duration. The Plan shall become effective on the Effective Date,
subject to shareholder approval. Options may be awarded under the Plan prior
to such approval, provided, that no Option may be exercised prior to such
approval and, in the event such approval is not obtained, the Options shall be
of no effect. The Plan shall be unlimited in duration and, in the event of
Plan termination, shall remain in effect as long as any Options granted under
it are outstanding and not exercised; provided, however, that no new Options
shall be made under the Plan on or after the tenth anniversary of the
Effective Date.
3.2. Shares Subject to Plan. The shares of Stock with respect to which
Options may be awarded under the Plan shall be currently authorized but
unissued shares or currently held or subsequently acquired by the Company as
treasury shares, including shares purchased in the open market or in private
transactions. The maximum number of shares of Stock available for Options
under the Plan shall not exceed 100,000 shares.
A-2
<PAGE>
3.3. Adjustments to Shares. In the event of any merger, consolidation,
reorganization, recapitalization, spinoff, stock dividend, stock split,
reverse stock split, exchange or other distribution with respect to Shares or
other change in the corporate structure or capitalization affecting the
Shares, the type and number of Shares which are or may be subject to Options
under the Plan and the terms of any outstanding Options (including the
exercise price at which outstanding options may be exercised) shall be
equitably adjusted by the Administrator, in its sole discretion, to preserve
the value of benefits awarded or to be awarded to Eligible Trustees under the
Plan. Upon a merger or consolidation in which the Company is not the surviving
entity, the Administrator may terminate each outstanding Option; provided,
however, in the event the Administrator elects to terminate outstanding
Options, the Optionee shall have the right immediately prior to such merger or
consolidation to exercise his Option in full even though such Option would not
otherwise be exercisable under the option vesting schedule, if any.
The existence of this Plan and the Options granted hereunder shall not
affect in any way the right or power of the Company or its shareholders to
make or authorize any or all adjustments, recapitalizations, reorganizations,
spinoffs, or other changes in the Company's capital structure or its business,
any merger or consolidation of the Company, any issue of bonds, debentures,
preferred or prior preference stocks ahead of or affecting the Company's Stock
or the rights thereof, the dissolution or liquidation of the Company, any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Except as expressly provided by the terms of this Plan, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property or for labor or rights or warrants
to subscribe therefor or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect
Options under the Plan.
3.4. Limit on Distribution. Distribution of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to issue any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity.
(b) The Administrator shall add such conditions and limitations to any
Options to any Participant as is necessary to comply with Section 16(a) and
16(b) of the Securities Exchange Act of 1934, and the rules and regulations
thereunder or to obtain any exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to
reflect the transfer of shares of Stock, the transfer of such shares may,
at the direction of the Administrator, be effected on a non-certificated
basis, to the extent not prohibited by applicable law or the rules of any
stock exchange.
3.5. Taxes. All Options under the Plan are subject to all applicable taxes.
3.6. Distributions to Disabled Persons. Notwithstanding any other provision
of the Plan, if, in the Administrator's opinion, a Participant or other person
entitled to benefits under the Plan is under a legal disability or is in any
way incapacitated so as to be unable to manage his financial affairs, the
Administrator may direct that payment be made to a relative or friend of such
person for his benefit until claim is made by a conservator or other person
legally charged with the care of his person or his estate, and such payment or
distribution shall be in lieu of any such payment to such Participant or other
person. Thereafter, any benefits under the Plan to which such Participant or
other person is entitled shall be paid to such conservator or other person
legally charged with the care of his person or his estate.
3.7. Transferability. Options are not transferable prior to exercise, except
as designated by the Participant by will or by the laws of descent and
distribution. Notwithstanding the foregoing provisions of this subsection, the
Administrator may permit transfer of Options under the Plan to be transferred
to or for the benefit of the Participant's family, subject to such limits as
the Administrator may establish.
A-3
<PAGE>
3.8. Form and Time of Elections. Any election required or permitted under
the Plan shall be in writing, and shall be deemed to be filed when delivered
to the Secretary of the Company.
3.9. Limitation of Implied Rights. Neither the Participant nor any other
person shall, by reason of participation in the Plan, acquire any right in or
title to any assets, funds or property of the Company whatsoever prior to the
date such shares are distributed. A Participant shall have only a contractual
right to the shares, if any, distributable under the Plan, unsecured by any
assets of the Company. Nothing contained in the Plan shall constitute a
guarantee by the Company that the assets of the Company shall be sufficient to
provide any benefits to any person.
3.10. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
3.11. Action by Company. Any action required or permitted to be taken by the
Company shall be by resolution of the Board, or by action of one or more
members of the Board (including a committee of the Board) who are duly
authorized to act for the Board, by a duly authorized officer of the Board, or
(except to the extent prohibited by applicable law or the rules of any stock
exchange) by a duly authorized officer of the Company.
3.12. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and
the plural shall include the singular.
SECTION 4
ADMINISTRATOR
4.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in the Secretary of the Company
(the "Administrator") in accordance with this Section.
4.2. Powers of Administrator. The Administrator will have the authority to
establish, amend and rescind any rules and regulations relating to the Plan,
to determine the terms and provisions of any agreements made pursuant to the
Plan and to make all other determinations that may be necessary or advisable
for the administration of the Plan.
4.3. Information to be Furnished to Administrator. The Company shall furnish
the Administrator with such data and information as may be required for it to
discharge its duties. The records of the Company as to the period of a
Trustee's service shall be conclusive on all persons unless determined to be
incorrect. Participants and other persons entitled to benefits under the Plan
must furnish the Administrator such evidence, data or information as the
Administrator considers desirable to carry out the terms of the Plan.
4.4. Liability and Indemnification of Administrator. The Administrator shall
not be liable to any person for any action taken or omitted in connection with
the administration of the Plan unless attributable to his own fraud or willful
misconduct; nor shall the Company be liable to any person for any such action
unless attributable to fraud or willful misconduct on the part of a trustee or
employee of the Company. The Administrator and persons acting as the
authorized delegates of the Administrator under the Plan, shall be indemnified
by the Company, to the fullest extent permitted by law, against any and all
liabilities, losses, costs and expenses (including legal fees and expenses) of
whatsoever kind and nature which may be imposed on, incurred by or asserted
against the Administrator or authorized delegates by reason of the performance
of an Administrator function if the Administrator or authorized delegates did
not act dishonestly or in willful violation of the law or regulation under
which such liability, loss, cost or expense arises. This indemnification shall
not duplicate but may supplement any coverage available under any applicable
insurance.
A-4
<PAGE>
SECTION 5
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 3.3 (relating to certain adjustments to shares), no
amendment or termination may materially adversely affect the rights of any
Participant or beneficiary under any Option made under the Plan prior to the
date such amendment is adopted by the Board.
A-5
<PAGE>
- --------------------------------------------------------------------------------
P R O X Y
SECURITY CAPITAL PACIFIC TRUST
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF TRUSTEES
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 10, 1997
The undersigned hereby appoints each of C. Ronald Blankenship, R. Scot Sellers
and Jeffrey A. Klopf, as proxies with full power of substitution, to represent
the undersigned at the annual meeting of shareholders of Security Capital
Pacific Trust to be held on June 10, 1997, and at any adjournments or
postponements thereof, and to vote at such meeting the common shares of
beneficial interest that the undersigned would be entitled to vote if present at
such meeting, in accordance with the instructions indicated on the other side of
this card; if no instructions are indicated, the shares represented by this
proxy will be voted for the election of all listed nominees for Trustee and for
the approval of the 1996 Share Option Plan for Outside Trustees and, at the
direction of the proxies named above, on any other matter that may properly come
before the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting and the
Proxy Statement together with this Proxy.
Comments/Address change
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Continued and to be signed and dated on the other side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
- --------------------------------------------------------------------------------
|
Please mark your |___
[X} vote as indicated __
in this example. |
- --------------------------------------------------------------------------------
1. The election of the following persons as Trustees:
Calvin K. Kessler, James H. Polk, III, John C. Schweitzer, James A. Cardwell,
John T. Kelley, III, C. Ronald Blankenship and William G. Myers
[_] FOR ALL NOMINEES [_] WITHHOLD VOTE FROM ALL NOMINEES
FOR ALL NOMINEES, except the following nominees:
Change of
Address/Comments
- -------------------------------------------- [_] on Reverse Side
2. The approval of the 1996 Share Option Plan for Outside Trustees.
[_] FOR [_] AGAINST [_] ABSTAIN
- --------------------------------------------------------------------------------
3. To vote upon any other matters that may properly be presented at the meeting
according to their best judgment and in their discretion.
- --------------------------------------------------------------------------------
Please sign exactly as name(s) appears to
the left. If shares are held jointly,
each joint tenant should sign. If signing
as attorney, executor, administrator,
trustee or guardian or as officer of a
corporation or other entity, please give
full title and capacity in which you are
signing.
[Insert Recordholder Information]
-----------------------------------------
Signature
-----------------------------------------
Signature, if held jointly
Dated: ____________________________, 1997
Please sign, date and return this proxy
card promptly using the enclosed postage-
paid envelope whether or not you plan to
attend the meeting.
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
. FOLD AND DETACH HERE .
ADMISSION TICKET ANNUAL MEETING
OF SHAREHOLDERS
Tuesday, June 10, 1997
[LOGO SECURITY CAPITAL PACIFIC TRUST] 10:00 a.m. (El Paso time)
Old El Paso Room
Seventh Floor
Norwest Bank El Paso
El Paso, Texas 79912
[Insert Recordholder Information]
- --------------------------------------------------------------------------------
